Negotiation and Discounting

If you’ve ever read one of the myriad of wedding magazines out there you’ll regularly see couples advised to negotiate with all vendors and ask for discounts. In this economy I think it’s only natural for couples to at least inquire about the possibility of negotiation especially when they’re spending considerable sums of money.

Of course there is no rule that you ever have to negotiate or discount. If you’re fully booked up for the next 18 months, you’d be crazy to discount your prices (in fact, you should almost definitely raise them but that’s another topic for another day!).

The definition of negotiation is “to confer with another or others in order to come to terms or reach an agreement”. Note that it doesn’t mention anything about discounting. I rarely provide a straight $ discount which will adversely affect my profit margin, however I occasionally negotiate and first I ask myself the following questions:

1. Do I need this booking?

2. Do I want this booking?

3. Is this is busy date that will likely get booked by another couple/is there enough time for additional inquiries to come in?

4. Knowing which products and services they’re interested in, is there any room for negotiation vs discounting?

Scenario 1: let’s say I have a couple inquiring about Labor Day weekend 18 months from now at a venue 2 hours from my home. They want me to take $500 off a $4000 package which includes coverage, a second shooter and a disc of images. They’re not interested in any products or albums. In this situation I personally wouldn’t discount. There’s a high probability of me booking another wedding. They’re not interested in any products that I can upgrade/gift rather than discount so I’d probably politely decline.

Scenario 2: it’s December and I get an inquiry for a small winter wedding in January. I’m available , it’s just 30 guests and it’s a daytime wedding, they’re interested in a package which includes a small wedding album and costs $4000. They ask if there are any off-season discounts. Whilst I know that the number of guests doesn’t actually change the amount of work (I still have to provide the same coverage and service), it might mean that I don’t have to pay for a second shooter. It’s a daytime wedding which means I get a Saturday evening with my husband (which has a personal value to me). And with 8 weeks to go it’s unlikely that I’ll get another inquiry. So in this situation, I would happily offer a small off-season discount however I would first see if they were open to paying full price and getting their discount in products as this has less impact on my profit margin.

And here are the imaginary numbers:

Scenario 1: If the package is $4000, costs (fixed and variable) are $2000 then my gross profit is $2000 (remember you’ll pay tax on this amount too), a 50% profit margin. If I discount $500 now my gross profit is $1500, a 37% profit margin. By discounting $500 I have lost 13% margin

Scenario 2: The package is still $4000 but I take out the second shooter and upgrade their package (extra album pages, bonus print press album for parents etc etc), my costs are now $2250 so my gross profit is $2250, a 48% profit margin. I lose just 2% margin and my couple feel happy that they received additional product/upgrades listed at $750 in my price list (more than the $500 discount they initially requested).

It’s really helpful to know the profit margin on all of your products so you know exactly how much you can discount it (if you need/want to) and whether it’s a good item to offer in negotiation.

Many other businesses take this approach too. During the off-season the Ritz-Carlton could discount their hotel rooms by $200 OR they could add a gift certificate for dinner or the spa for $200. Hotel guests get a $200 value gift yet the cost to the Ritz Carlton is maybe $75 so it has less impact on their bottom line.

We’d love you to comment. Do you get a lot of requests for discounts? Do you discount? Is this information helpful?

Kristin - June 4, 2012 - 3:59 pm

I just found your guys’ blog (via CALIMA Portraits) and I love it! Thanks for all the useful and helpful discussions, can’t wait to visit more.

This post particularly struck me, as it’s something I deal with from almost every client inquiry! I’ve always struggled with it, since I’d be considered a “budget” photographer in my market so I’m not sure where to draw the line there. Your breakdown really helped — I’m trying to process all the numbers too so I can do a similar breakdown for myself. Thanks so much!

Leah - June 6, 2012 - 3:06 pm

Hi Kristin!

It can take some time but it’s so valuable to really understand your costs and therefore your profit margin on everything you offer. Wherever possible I’d avoid simply slashing your prices, this is money out of your pocket and see if your clients are open to getting something that doesn’t cost you as much but has a high-perceived value (a few more hours of coverage, a mini engagement shoot or even a guest sign in book). Thanks for reading!

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